Government doubles borrowings in August

MANILA, Philippines – Larger issuance of Treasury notes and take-up from multilateral loan facilities for state programs drove government borrowings in August, latest data from the Bureau of Treasury showed.

Gross borrowings totaled P24.441 billion in August, rising two-fold from last year’s P12.217 billion, according to the government’s cash operations report for the month. Borrowings increased in the domestic and foreign markets.

Broken down, gross local borrowings totaled P29.340 billion, while their foreign counterparts reached P3.282 billion. The former rose 42.63 percent year-on-year, while the latter went up by a faster 46.06 percent.

The government borrows from the domestic and foreign markets to finance its deficit and to pay for its existing debts.

While as of August, the budget deficit of P3.41 billion is way below this year’s cap of P283.7 billion, the Aquino administration has been borrowing funds highly to replace high-interest, short-termed debts with longer-dated and low-yielding ones.

Nevertheless, for the first eight months of the year, state borrowings have dropped by 43.42 percent to P59.781 billion from P105.656 billion last year, figures showed.

The government has programmed to borrow P283.687 billion this year, although a lower budget deficit—which indicates more revenues being spent than collected—may push it to borrow less similar to previous years.

In August, domestic borrowings were mainly driven by larger issuance of Treasury bills. Net T-bill issuances amounted to P4.340 billion, up from a redemption or net payment of P1.340 billion last year.

The issuance of Longer-termed Treasury bonds stood at P25 billion, data showed.

T-bills and T-bonds are investment instruments used by the government to borrow money from local investors. Funds are lent by investors to the state, which in turn, pays quarterly interest and promises to return the full amount at a specific time in the future.

Net floatation means more securities were issued than paid back, net redemption indicates the opposite.

The government sourced financing requirements from its existing project loan facilities in August. Credit was secured from the Asian Development Bank (P1.191 billion), the World Bank (P1.434 billion) and the Japan Bank for International Cooperation (P388 million).

No program loans were recorded during the month.

Project loans are those used to finance specific projects by specific state agencies. They differ from program loans, where the government has more say in funneling funds for general development programs.